"The Stock Market's Fate: Inflation's Impact and a Strategic Playbook for the Year Ahead"

Analysts at 22V Research have outlined a playbook for how the stock market will react to different inflation scenarios. They predict that if inflation remains above 2.4% but below 2.75%, the Fed may still cut rates, favoring deeper cyclicals and making it tough to short the U.S. dollar or bet on U.S. Treasury yields declining. If core inflation tracks above 3%, Treasury yields and the U.S. dollar would move higher, benefiting risk-off factors. Alternatively, if inflation falls below 2.4% without an increase in the unemployment rate, stocks are expected to perform well. The analysts also suggest that lagging companies, such as small caps, should continue to catch up.